GOP weighs coming up with separate budget

Party to reach decision this week

Published 3:10 am, Tuesday, September 1, 2009

It's 2007 -- Republican Gov. M. Jodi Rell and the Legislature's Democratic majority have put income tax increases on the table, and the Legislature's small, but vocal, Republican minority steps forward with a no-tax-increase budget.

They help change the terms of the debate, and ultimately, no income tax hike is passed that year.

This year, after leaving tax hikes out of her previous two budget proposals, Rell on Thursday recommended a surcharge on the corporate profits tax and increasing so-called sin taxes on cigarettes and

alcohol.

GOP lawmakers praised her for holding the line against the Democrats' income tax hikes and proposing a package compared to the majority's $1.8 billion tax package. But Republicans continue to say that the 2009-10 and 2010-11 budgets can be balanced without new taxes.

So will they again challenge Rell's proposal and shop their own no-tax-increase plan out to the public?

House Minority Leader Lawrence Cafero Jr., R-Norwalk, said his members held an afternoon phone caucus Monday to discuss that topic. He said a decision will be reached by week's end.

"The Democrats have taken the governor's compromise gesture to mean, Aha! You finally admitted it governor. You knew all along we cannot get out of this without raising taxes,' " Cafero said. "And I deeply resent that. It's not true. We have demonstrated, and I believe will continue to, that this can be done without raising taxes. ... What the Democrats are trying to do is make the governor's compromise offer the floor and their high proposal the ceiling and come somewhere in the middle."

But the fiscal climate is far more daunting for Cafero and his legislative colleagues than two years ago.

One reason Rell in 2007 backed off of her initial income tax proposal, which she had wanted to use to fund investments in education, is a forecast deficit turned into a surplus. That was what the Republicans had gambled on at the time when they opposed hers and the Democrats' tax hikes and offered their own, third budget alternative.

But the governor and General Assembly now face an estimated $8.55 billion two-year deficit. Republicans earlier this year did put out a no-new-taxes spending plan that reflected a deficit of about $8 billion.

In hinting she was going to propose tax hikes earlier last week, Rell told reporters she "exhausted" the cuts. Republicans such as Cafero took issue with the statement, and on Thursday, the governor sought to clarify the statement, insisting she would slash government further but the Democrats would never accept it.

The biggest sticking point for the GOP is Rell's proposed three-year, 10 percent surcharge on the corporate profits tax. The Democrats put a higher surcharge of 15 percent on the table, and Republicans said both are bad for business and the economy.

"Whether it's temporary or not. Five percent. Twenty percent. Thirty-five percent. The corporate surcharge by definition says, If you're a Connecticut corporation doing business in Connecticut, making a profit, we're going to tax you beside what we already tax you,' " Cafero said.

State Rep. John Hetherington, R-New Canaan, said that if he had to, he would vote for Rell's budget, but it might be worthwhile for Republicans to come out with a package.

"The thing that really troubles me is the surcharge. ... I think that's destructive in a time of economic stress," Hetherington said. "It doesn't hurt to have alternatives, even if they don't ultimately survive" budget negotiations.

It is unclear whether Senate Republicans are also considering putting a new, no-tax-increase budget out to the public.

Members of the caucus have expressed concern about Rell's proposal. Asked Thursday whether he would vote for the governor's budget, freshman state Sen. L. Scott Frantz, R-Greenwich, said, "I'm not for any sort of income-related tax increase, to be honest with you."

Senate Minority Leader John McKinney, R-Fairfield, could not be reached Monday for comment.

"Whether we come out with a formal proposal or not or it finds its way to the negotiating table, I can't say right now," Boucher said.

Asked whether there is some concern the Republicans will undermine Rell should they again buck her tax proposals, Cafero said no.

"It underscores what she's been saying all the time and more clearly demonstrates exactly the spirit in which she offered her latest budget -- not as a floor but as a compromise "¦ with a supermajority of Democrats who believe they can't cut and we should tax," Cafero said. "I think it better frames the issue."